Edwards, Neil Luke v Idaville Pty Ltd
[1996] FCA 275
•23 APRIL 1996
CATCHWORDS
CORPORATIONS - oppressive conduct of affairs - whether conduct oppressive or unfairly prejudicial or unfairly discriminatory - discretionary trust - corpus constituted by damages awarded to one director, shareholder and primary beneficiary for medical negligence - other shareholder/director and principal beneficiary having power to control Trust as Appointor, Guardian and Principal Creditor - alleged failure to hold formal directors' and shareholders' meetings - withdrawal of monies by controlling beneficiary and shareholder director - subsequent repayment of withdrawals, one with interest - establishment of system of co-signature of all future withdrawals - allocation of all profits of Trust to non‑controlling shareholder, director and primary beneficiary for last 3 years - alleged threat of Appointor to change Trustee - whether non‑controlling shareholder/director and primary beneficiary entitled to relief.
Corporations Law, s260(2)
Re Back 2 Bay 6 Pty Ltd 12 ACSR 614
Cf Re H R Harmer Ltd (1958) 3 All ER 689
Wayde & Anor v New South Wales Rugby League Ltd (1982) 180 CLR 459
NEIL LUKE EDWARDS v IDAVILLE PTY LTD and GRAHAM FRANCIS EDWARDS
NO. WAG 3038 OF 1994
JUSTICE R D NICHOLSON
PERTH
23 APRIL 1996
IN THE FEDERAL COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION ) NO WAG 3038 OF 199[ ]
B E T W E E N NEIL LUKE EDWARDS
Applicant
and
IDAVILLE PTY LTD
First Respondent
and
GRAHAM FRANCIS EDWARDS
Second Respondent
MINUTE OF ORDER
JUDGE MAKING ORDER: JUSTICE R D NICHOLSON
DATE OF ORDER: 23 APRIL 1996
WHERE MADE: PERTH
THE COURT ORDERS THAT:
The application be dismissed.
The applicant pay the respondent's costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
WESTERN AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION ) NO WAG 3038 OF 1994
B E T W E E N NEIL LUKE EDWARDS
Applicant
and
IDAVILLE PTY LTD
First Respondent
and
GRAHAM FRANCIS EDWARDS
Second Respondent
CORAM:JUSTICE R D NICHOLSON
DATE:23 APRIL 1996
PLACE:PERTH
REASONS FOR JUDGMENT
This is an application for orders pursuant to s260(2), pars(d), (e), (f), (j) and (k) of the Corporations Law. It is sought to restrain the second respondent from taking any steps towards obtaining, dealing with, pledging or securing any of the assets of the Ulakine Trust ("the Trust") and to effect his resignation as a director of the first respondent ("the Trustee") and the appointment in his stead of Robin Boyd Judd, a chartered accountant. It is sought also to have the second respondent transfer his share in the first respondent to Mr Judd and to have the applicant appointed as Guardian and Appointor of the Trust in lieu of the second respondent.
The applicant was born in 1963. He left school in 1977 aged 14, to work on the family farming properties in Quairading, Western Australia. He is presently thirty two and is married with two daughters.
He was born with only one kidney. In 1983 when he was aged twenty, he sustained an injury to his kidney while playing football. When he underwent medical treatment for the injury his only kidney was removed, resulting in a negligence action commenced on his behalf in the District Court of Western Australia. It was settled in May 1989, resulting in a payment to the applicant of $670,000 inclusive of costs ($20,000). He has since undergone two kidney transplant operations.
At that time legal advice to the applicant was that it would be prudent to establish a trust to administer the compensation monies. The result was that the Trustee was incorporated in 1989 and the Trust established as a discretionary trust. Its sole activity is to act as trustee for the Trust. At all times it has had only two directors and two shareholders being the applicant and the second respondent (who is the applicant's father).
There is a dispute concerning the basis upon which the compensation monies in the amount of $650,000 came to be administered by the Trust. In accordance with a minute of agreement between counsel, this is an area of disputed fact in relation to which this Court is not to make any findings. It is sufficient to find the Trust accounts for 1989-90 show that sum as a credit to the beneficiary's loan account of the second respondent - that is, a loan of that sum by him to the Trust.
Examination of the Trust Deed for the Trust reveals that the second respondent is named as both Guardian and Appointor. The second respondent is named with the applicant as one of the two primary beneficiaries of the Trust.
The Trust has invested its capital by placing it on fixed deposit with the Westpac Bank at Quairading in the amount of $550,000 ("the Trust capital") after application of $83,099 in 1989-90 to the purchase by the Trust of a combine harvester. Until 1992 nett income from the Trust capital was treated for accounting purposes as divided equally between the applicant and the second respondent or the second respondent's company Wirrawong Pty Ltd ("Wirrawong"). Since 1992 the whole of the profits of the Trust have been allocated to the applicant. The applicant has drawn cheques on the Trust cheque account withdrawing amounts from time to time in accordance with his need. Allocated interest income to the second respondent appears in the accounts to have been credited generally to his beneficiary loan account, thereby raising the balance of that account from $650,000 until in 1994-95 it stood at $713,434 in respect of the second respondent and Wirrawong. The beneficiary's loan account for the applicant reflects that he has drawn monies in excess of his allocated annual income earnings thereby creating a debit balance in his beneficiary loan account for the same period of $112,244.
This proceeding is instituted by the applicant as a shareholder and director of the Trustee and as a primary and secondary beneficiary of the Trust.
In the applicant's outline of submissions the factual basis relied upon for the Court's intervention pursuant to s260(2) of the Corporations Law was identified under six heads. At the hearing it was agreed it would be appropriate for the matter to be decided upon written submissions having the effect of indicating the evidence relied upon to support each of the relevant heads. In the applicant's closing submissions it is made apparent that reliance is placed upon three of the original six grounds and the remaining three matters form part of the "overall framework" in which the Court should consider the matter.
These latter matters are ones which the applicant says go to showing the powerful position of control of the second respondent in relation to the applicant.
The first of those factors is that the second respondent is a creditor of sufficient level to bankrupt the Trust; the second is the second respondent's position as Appointor gives him power to remove the Trustee; the third is the second respondent's position as guardian gives him power to veto any proposals in relation to dealings with the capital moneys and so to cause the Trust capital to remain tied up (potentially until 2069) in a way which may never be available to benefit the applicant or his family.
The second respondent is quite frank in acknowledging he does not want to let control of the Trust capital go into anybody else's hands for several reasons. He is afraid the Trust capital will be dissipated in two to five years and the applicant and his family then will look to the second respondent to assist them. He regards the Trust capital as being there to protect the applicant's family and to support his children. He is concerned the applicant has been engaged in unsuccessful business ventures in the past. He also has in mind that matrimonial difficulties have been experienced by members of his family.
There are other features of the facts which the case for the applicant points to as providing a relevant framework. Firstly, there is the father-son status of the two directors and shareholders of the Trustee. Next there are the ages of the parties, the father being fifty seven and the son thirty three. Neither has formal education to a senior level. When the Trustee and the Trust were established in 1989 and received the compensation monies there was a significant bond of trust between the father and the son. That relationship has deteriorated since around mid-1992 to 1993. The applicant has health which could deteriorate and he is now married and supports a wife and two children. The Trust capital cannot be invested elsewhere than in its present placement with Westpac without the second respondent's agreement. The evidence of the applicant was the second respondent told him that Westpac was where the family business was done and that was where the money was staying. In my opinion the evidence did not establish any advantage to any family farming partnership in which the second respondent is or has been a partner in the placement of the Trust capital with Westpac.
To establish conduct which is "oppressive" or "unfairly prejudicial to" or "unfairly discriminatory against" the applicant for the purposes of the application of s260(2) of the Corporations Law the case for the applicant relies upon what was said by Brennan J in Wayde & Anor v New South Wales Rugby League Ltd (1982) 180 CLR 459 at 472 where, speaking of s320 of the Companies Code which was in identical terms to s260 of the Corporations Law, he said:
"It is not necessary now to decide whether "oppressive" carries in the context of s320 the meaning which it carried in the context of the statutory precursors of s320. At a minimum, oppression imports unfairness and that is the critical question in the present case".
In a further passage Brennan J in Wayde at 472 said:
"The question of unfairness is one of fact and degree which s320 requires the court to determine, but not without regard to the view which the directors themselves have formed and not without allowing for any special skill, knowledge and acumen, possessed by the directors. The operation of s320 may be attracted to a decision made by directors which is made in good faith for a purpose within the directors' power, but which reasonable directors would think to be unfair. The test of unfairness is objective and it is necessary, though difficult, to postulate a standard of reasonable directors possessed of any special skill, knowledge or acumen possessed by the directors. The test assumes (whether it be the fact or not) that reasonable directors weigh the furthering of the corporate object against the disadvantage, disability or burden which their decision will impose, and address their minds to the question whether a proposed decision is unfair."
In that case the High Court held that although certain director's resolutions to exclude the Western Suburbs District Rugby League football club from a competition were "manifestly prejudicial to and discriminately against" it they were nevertheless not "unfair". In Wayde's case at 466, it was said by Mason ACJ, Wilson, Deane and Dawson JJ, that:
"It is a point of great importance that the decisions were made in the exercise of a power that is expressly conferred on the Board, a power to determine the nature and extent of the competition that was to take place in 1985 and the clubs that were to be permitted to participate in it."
At 472 Brennan J said:
"In the case of some discretionary powers, any prejudice to a member or any discrimination against him may be a badge of unfairness in the exercise of the power, but not when the discretionary power contemplates the effecting of prejudice or discrimination.... It is not necessarily unfair for directors in good faith to advance one of the objects of the company to the prejudice of a member where the advancement of the object necessarily entails prejudice to that member or discrimination against him."
The applicant also relies upon what was said by Thomas J in Re Back 2 Bay 6 Pty Ltd 12 ACSR 614 at 614-5:
"Although ultimately there would be a deadlock between shareholders, it is not accurate to describe the situation as one of deadlock in management, as the majority is in a position to control the company. It is, however, in a position to oppress the applicant and on my assessment of the evidence the respondents have since at least 16 November 1993 excluded her from the management and prevented her from finding out details of the dealings of the company, its records and the way in which it has been run. This may well have resulted from a perception by the respondents that the applicant had agreed to be a passive shareholder and director, and to play the role of artist supplying patterns and little else. However, that disputed allegation is not a proper answer to the claim of the applicant, whose rights as a 50% shareholder and as a director remain. There is a strong circumstantial case to suggest that these rights have been prejudiced and remain in danger of being adversely affected by the conduct of the respondents. The material of the respondents confirms that irreconcilable differences between the parties have arisen. ..."
In the present case the Trustee has the power to "discriminate against" the applicant by (for example) distributing all of the Trust income to the second respondent alone. If that were to occur the Court might have to determine whether the decision to exercise the admittedly discretionary power in that way was, in the circumstances, one which no reasonable trustee could have reached and from which it might be inferred the decision was manifestly unfair. However, as appears from Wayde's case, that conclusion would not follow merely by showing, without more, that the exercise of the power discriminated against, or was prejudicial to, the applicant.
Here the issue does not arise because all income of the Trust presently goes to the applicant.
It was not argued here that s260 should be applied as a composite expression.
It is necessary then to turn to the three areas which are relied upon on behalf of the applicant to establish conduct of the requisite character.
Corporate meetings and decision-making
For the applicant it is firstly contended the Trustee has not held directors or shareholders' general meetings, consequently the annual Trust and Trustee accounts have not been approved as required by law. It is said the Trustee does not function with any workable corporate mind, but rather the entire affairs of the Trustee remain stagnant as well as being dominated by the wishes of the second respondent who essentially ignores corporate existence and exercises by default, unfettered control over its affairs without reference to the applicant who is its co‑director and co-shareholder.
It is not in dispute that the articles of the Trustee provide in respect of shareholder's meetings for a quorum of two (article 53); for the directors to place the annual accounts before a general meeting five months after the end of the financial year (articles 47 and 121); and for a shareholder to receive a notice of every general meeting (article 130(a)). In relation to directors' meetings the articles of the Trustee provide directors are to meet and regulate their meetings as they think fit (article 93); decisions are to be determined by a majority of directors (article 94); and a quorum may be constituted by two directors (article 96). In addition, there is provision for an election of chairman of board meetings (article 98), that chairman having a casting vote in the event of an equality of votes as between directors (article 94).
In his affidavit evidence the applicant testified that there had never been directors' meetings prior to reinvestment of the Trust capital and that he had not been consulted by the second respondent in respect of investment decisions. Further, when he had been ill he had not been advised when a meeting was to take place. In addition, there was one directors' meeting and one annual general meeting where he was shown as being present where he had not been. This evidence was not challenged in his cross-examination.
The second respondent's evidence was that there has not been a need for formal regular board meetings. His evidence was he had his accountants prepare the necessary documents which he read and signed. He would give it to the applicant to view and sign if he wished to by calling him over, telling him it was there and saying "let's have a meeting". The document is produced by the accountants and he is aware of what is in it before it gets typed up. He signs it and sends it back. He notifies the applicant of the meeting. Sometimes due to his health the applicant does not turn up and that is a real problem.
The evidence of Mr Steber, Branch Manager of the Quairading office of the accountants to the Trust, was that he would attend a meeting with the second respondent at which the minutes would be signed without the applicant being present.
I find that meetings of the Trustee were not held in accordance with its memorandum and articles or were held without the applicant being present.
There is, however, a question whether these facts establish conduct which is "oppressive" or "unfairly prejudicial to" or "unfairly discriminatory also against" the applicant. At all times the applicant had an equal statutory obligation and right to convene directors' meetings and shareholders' annual general meetings of the Trustee. There is no evidence the applicant sought to do so or, having done so, had been frustrated by the second respondent. It has always been open to the applicant to attend meetings convened by the second respondent.
There is no evidence the business conducted at the meetings at which the applicant was not present was business which was oppressive from his view point. On the contrary, the evidence was that such meetings, at least since 1992, authorised the allocation of the annual income totally to the applicant. There was no evidence that decisions made at any of the meetings in issue in relation to reinvestment of the Trust capital were contrary to the applicant's interests as a beneficiary of the Trust. There is no evidence that other or different business could have been conducted at the meetings.
In addition, there is no evidence of any course of conduct embarked upon by the second respondent so as to exclude the applicant from participation in directors or shareholders' meetings. The applicant received the Trust's accounts and had access to the books of account.
For the applicant it is contended that the evidence as to the manner in which meetings are conducted shows that the applicant is frozen out of the decision making processes of the Trustee. It is contended the consequence is that the holding of the Trust funds on fixed deposit at Westpac Quairading has become an entrenched status quo. In effect it is said the trustee is run by the second respondent and the Trust's accountants without the participation of the applicant and with only lip service being paid to statutory corporate requirements. As against this, however, it the case that the applicant has received the Trust accounts and has access to the books of account. The applicant's real complaint is that the second respondent, being in a legal position of control and holding a view that the Trust capital should remain
invested where it is, is not open to consideration of alternative modes of investment.
The evidence of the second respondent was that he had never refused to discuss an alternative investment with the applicant. However, his view was that enough Trust capital had to be retained to produce an income for the applicant and, if the capital was put into shares or property so that the income was reduced and the applicant's health then again broke down, there would not be enough Trust nett income for the applicant to live off. I do not consider a finding can be made that the second respondent adamantly refused to consider any alternative investment.
In my opinion, in light of these considerations, the complaint based on corporate meetings and decision-making cannot alone support a finding of conduct which is "oppressive" or "unfairly prejudicial" or "unfairly discriminatory". It must, however, be considered as an event forming part of a consecutive story: Cf Re H R Harmer Ltd (1958) 3 All ER 689 at 708 per Wilmer LJ.
Withdrawals from trustee cheque account.
At the time of the issue of the application the fate of significant Trust funds was of real concern to the applicant. The withdrawals in question were made by the second respondent. The first was the sum of $16,100 on 11 July 1993 said to be to repay a loan. The second was the amount of $75,000 on 8 February 1994. Each withdrawal was said by the applicant to have been made without any consultation with him or with his agreement as co-director.
In his oral testimony the second respondent said just prior to the success of the applicant's claim for compensation the partnership of W E Edwards & Co in which the applicant had been a partner since 1981, had purchased a four wheel drive vehicle which was difficult for the applicant to drive after he had received dialysis. It was therefore necessary within 6 months to buy another vehicle. The second respondent advised the applicant he was going to make the withdrawal and the applicant did not disagree. The second respondent loaned $10,000 from his personal monies to the partnership to enable the vehicle to be purchased. At the time he had said to the applicant if he was successful in his compensation claim he would have to repay the loan to the second respondent but if he was not successful they would have to sort something out about it. His evidence was nothing was said about interest although, when the applicant had succeeded in his claim, he had said to him that the amount of the loan could remain in the Trust capital and when it produced income the debt could be repaid out of that together with interest at the rate of which the money was invested. The figure of $16,100 represented the loan of $10,000 together with interest at the applicable rate.
The applicant's complaint in relation to this loan is not either in relation to the withdrawal or repayment of the loan or the interest but rather that the manner in which each occurred was without consultation with him and thus was "unfair". It is said, for example, that the loan could have been set off against a debt of $109,470 then owed to the applicant by the partnership of W E Edwards & Co.
As to the withdrawal of $75,000 the second respondent's affidavit evidence was that he intended to include a residence for the applicant in a new building on his farming property, provided a portion of the building costs could be made available from the Trust and the applicant agreed to this. He said he borrowed the sum from the Trust and that it was recorded as a loan repayable. Mr Steber's oral evidence was that the second respondent was in need of short term finance but this was denied in cross-examination by the second respondent who said he could have raised the sum from a number of places because he had no liquidity problem. While there is no dispute that the amount was by way of a loan, or that it has since been repaid, the cheque butt relevant to withdrawal shows it was initially described as a drawing and subsequently by added words as a loan.
The second respondent's evidence was that at the time he decided to include a residence for the applicant in the new building the applicant's wife had not been living with him. The applicant had been in an unsuitable hot asbestos house and in poor health. He said the applicant agreed that the second respondent should extend the house to include the residence and should withdraw the moneys from the Trust fund to enable that to be done. Three months later the applicant had changed his mind. The applicant and his family have been living in rental accommodation but as the owners now require that property he has to find new accommodation in September. Consequently, the second respondent says he has repaid the borrowing so that the applicant can buy himself a home. The repayment has been without interest.
This evidence of the second respondent conflicts to some extent with the affidavit evidence of the applicant. The applicant deposed that in July 1993 he inquired what was being built on the family farm and was advised it was a house being built for the second respondent and the second respondent's father to be financed equally by each of them. The grandfather passed away on 2 November 1993 and, after that time, the applicant heard from other parties it was the second respondent's intention that they share the house with him. On becoming aware of the withdrawal of the $75,000 and making enquiry of the second respondent, he had been advised of the second respondent's intentions in that regard. However, he had never agreed to this and had no intention of having any share or interest in the house and requested the second respondent to refund the money to the Trust. It was not the case that his wife and he had separated but rather that she was unwell due to pregnancy and consequently gone to reside at her father's house from where she had access to medical facilities.
It is the case that on 29 March 1994 the applicant sought through solicitors to obtain an explanation from the second respondent on the manner in which the $75,000 had been disbursed. The inference from this is that he was unable to obtain an explanation from the second respondent.
In my opinion, it is more probable than not that the applicant's account states the truth of what occurred. Why else would the applicant have found it necessary to instruct solicitors to inquire how the sum of $75,000 had been disbursed?
It is apparent that even if what occurred with the $75,000 was innocent, it gave rise to legitimate concerns on the part of the applicant and his advisers in relation to the security of the Trust funds. These concerns led to the issue of the present application. In addition, it resulted in a compromise arrangement between the applicant and the second respondent where during the last two years and in relation to all future cheques drawn on the income of the Trust both the applicant's and second respondent's signatures are required. Notwithstanding that, all nett income of the Trust presently goes as a matter of course to the applicant.
Nevertheless, I am unable to conclude that the conduct relating to the two unauthorised withdrawals reaches the level of being "oppressive" or "unfairly prejudicial" or "unfairly discriminatory". It is not established that the withdrawal of the $75,000 was made in furtherance of the second respondent's personal ends. The residence was built and was available for use by the applicant and his family. When this withdrawal was made the second respondent had at least an arguable justification for debiting the applicant's beneficiary loan account. However, that was not done. The amount was treated as a drawing by the second respondent by way of loan.
Furthermore, the second respondent is the major creditor of the Trust. He would have been entitled to offset this withdrawal against the credit which he has in the Trust accounts. This was not done. Instead, the amount has been re‑deposited on a short term deposit so as to be available to assist the applicant in the purchase of a new home.
For the applicant it is contended that the fact that the second respondent's personal will is seen inevitably to prevail on the issue of no payment of interest on the withdrawal of $75,000 demonstrates the inherent unfairness in the way in which the trustee is controlled by the second respondent. The reality is, however, that the second respondent is in a position of control such that he could call up in satisfaction of the debt to him the entire Trust capital at will (subject to proof by the applicant of any limiting legal right to control that exercise arising from the circumstances in which the compensation monies were placed with the Trust, which circumstances are not to be the subject of any finding of fact here).
For the applicant it is said, nevertheless, that at a bare minimum, these money dealings are unsatisfactory in terms of the absence of any satisfactory documentation recording them beyond a bare cheque butt and the absence of any discussion on the part of the applicant in relation to withdrawals of such significant sums and as to the $75,000, an eleventh hour repayment without interest. It is said these facts demonstrate that the affairs of the Trustee have been run in a fashion which is unfairly prejudicial to the applicant as co‑director, co-shareholder and general beneficiary of the Trust. Furthermore, it is said that in a situation where the Trust and Trustee structures were founded in 1989 upon the applicant's complete trust in the second respondent's integrity, the dealings and their aftermath constitute in their own right a sufficient basis for the grant of the relief sought.
The monetary unfairness which has been established comprises only the failure to repay the $75,000 without interest. The managerial unfairness must be weighed in the context of the powers inhering in the second respondent as Appointor, Guardian and principal creditor of the Trust and the powers inhering in the applicant to convene a meeting of directors.
Furthermore, the current practice of monthly meetings between the second respondent and the applicant at which co-signature of withdrawals occurs, all of which are for the benefit of the applicant, weighs against the granting of relief with respect to future actions even if an element of unfairness properly pertains to the matters referred to.
Second respondent's threat as Appointor and Guardian
On 22 February 1995, the solicitors for the second respondent wrote to the solicitors for the applicant stating:
"Our client is happy to discuss the matter in an effort to resolve the issues but unless the dispute can be adequately resolved then our client proposes to exercise his powers as Guardian and Appointor of the Trust to appoint a new trustee".
The evidence for the second respondent was that the "threat" was prompted by a real concern that the Trust capital was being eroded by legal costs. The "threat" was not followed through.
In any event if it had been, it would have been no more than the legitimate exercise by the second respondent of a discretionary power conferred on him as Appointor by the Trust Deed. Consistently with the principle stated by the High Court in Wayde's case, that (without more) cannot be oppressive conduct or unfair discrimination or unfair prejudice to the applicant. To exercise a discretion to remove a corporate trustee where the alleged activities of that trustee are the subject of litigation likely to deplete the corpus of the Trust would arguably not have been either an unreasonable or unfair exercise of the Appointor's apparently unfettered discretion.
Conclusion
In my opinion, it is correctly submitted for the second respondent that the real complaint of the applicant is that the second respondent has a powerful position of control. Protected by that legal power, the second respondent is adamant that he will act to protect the Trust capital in a way which he considers protect the long term interests of the applicant. That position of control arises from the second respondent's position as Appointor, Guardian and principal creditor of the Trust. It is apparent there has been inadequate communication between the applicant and the second respondent. However, at least so far as future withdrawals are concerned, that matter is addressed by the arrangements for co‑signature of all cheques. In circumstances where the loan monies withdrawn have been repaid and where all the income of the Trust has been paid to the applicant for the last three years, I am unable to conclude that the applicant is in a position where he has been "oppressed" by the conduct of the second respondent. Likewise I do not consider that such conduct has been "unfairly prejudicial" or "unfairly discriminatory" to him. There is an entire absence of proof of discrimination. The substance of the real complaint of the applicant is that, as a consequence of the second respondent being in a position of control in relation to the Trust and the Trustee, he adheres to his views in relation to reinvestment and management of the Trust capital.
In my opinion, the application is not brought on a basis which entitles the applicant to relief pursuant to s260(2).
In relation to costs it is said for the applicant the Trust should bear the costs. For the second respondent it is disputed that the proceedings were "successful in causing the $75,000 to be restored to the Trust". There is simply not the appropriate factual foundation for a finding to be made in relation to this. In my opinion, there is no basis for departing from the normal rule that costs follow the event, so that the applicant should pay the costs of the second respondent.
In case these reasons are read by the parties or other persons unfamiliar with the law, I state that the conclusion I have reached is confined to the application of s260(2) of the Corporations Law to the circumstances referred to and not to whether any other issues of law arise in relation to the creation of the trust or conduct of the second respondent. The evidence of the second respondent in this case establishes that he has an intention of forgiving the debt due to him as principal creditor of the Trust upon his death. While he holds a draft will to effect this, he has not yet executed it. Until the long term future of the Trust fund is somehow secured in the interests of the applicant, there must remain a question mark over the credibility of the second respondent when he says he has only the interests of the applicant at heart. In my view, however, that circumstance considered along with those other circumstances referred to in these reasons cannot result in the application of s260.
I certify that this and the preceding 16 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.
Associate:
Date:
APPEARANCES
Counsel for the Applicant: Mr K Martin
Solicitors for the Applicant: Gibson & Gibson
Counsel for the
First and Second Respondent: Mr Malcolm McCusker QC and
Mr K F Sleight
Solicitors for the
First and Second Respondent: Mayberry Hammond & Co
Date of Hearing: 21 February 1996
Date of Judgment: 23 April 1996.
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